Provident Financial’s “quadruple whammy” puts lender into freefall

Specialist lender Provident Financial is in crisis today after revealing its home credit division is expected to lose up to £120m this year.

The group also admitted the Financial Conduct Authority was investigating a product sold by its credit card business, Vanquis Bank, which generates revenues of £70m a year. In response, it has withdrawn the interim dividend it announced last month.

Chief executive Peter Crook, who last year earned £6.3m, has quit with immediate effect with Manjit Wolstenholme changing her role to executive chairman.

RBC Europe analyst Peter Lenardos described the crisis as a “quadruple whammy” for the Bradford-based lender, which employs around 3,700 people.

Provident’s shares crashed when markets opened and eventually ended the day down 66%, having hit an intra-day low of -75%. The group, which had a market value of £5bn last autumn, slumped to be worth around £850m at the close.

Shareholders were reacting to the poor performance of the home credit division, with the company botching a restructure of its home credit field organisation.

In June the group announced it expected pre-exceptional profits from the Consumer Credit Division to around £60m, nearly half of its 2016 levels. Today it has told the stock market it is now forecasting a pre-exceptional loss of between £80m and £120m.

“I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business,” said Wolstenholme.

“Protecting the group’s capital base through withdrawing the interim dividend and in all likelihood the full-year dividend is the appropriate response to maintain the highly valuable franchises of Vanquis Bank, Moneybarn and Satsuma.

“My immediate priority is to lead the turnaround of the home credit business.”

Provident Financial chairman Manjit Wolstenholme

Provident Financial deployed its new home credit operating model, which involves employing full-time customer experience managers to serve customers rather than using self-employed agents, six weeks ago.

The transition period since the group had announced its planned changes had already created significant disruption, with agents leaving and reduced performance.

Provident Financial has said “the rate of progress being made is too weak and the business is now falling a long way short of achieving these objectives”.

Collections performance is currently running at 57% versus 90% in 2016 and sales at £9m per week lower than the comparative weeks in 2016.